Stock Market Volatility (VIX) Remains Historically High

With Tuesday’s sharp drop in the markets, investors have been brought back to the reality that stock market volatility is still stubbornly high. Actually, it’s been persistently high since October. Since the sharp rise in volatility back then, the VIX (or CBOE Volatility Index, also known as the ‘Fear Gauge’) has not dropped below 16. And occasionally, it’s risen much higher than that. A prolonged state of high volatility as reflected in the VIX underscores the rampant fear that continues to pervade markets.

VIX Volatility Averages are Historically High

Aside from the raw VIX number, though, there are certain moving averages that we use to extract more meaningful context from the index. On the chart above, we’ve plotted both the 50-day and 200-day moving averages of the VIX. These moving averages provide a running average of the VIX level for the past 50 or 200 days.

Earlier this month, the 50-day moving average hit a high around 22.3, which was higher than it’s been since February 2012. The average is slightly lower now at 21.7, but it’s still higher than it’s been since March 2016. As for the longer-term 200-day moving average of the VIX, it’s also holding high at around 16.6. This is higher than the average has been since September 2016.

The Takeaway

So what does all of this tell us about investor fear? Markets are in a prolonged state of historically high volatility, despite the sharp market rebound and recovery since late December. As a result, investors and institutions have been more apt to sell indiscriminately at the first sign of any trouble. We’ve seen a lot of this type of selling in recent weeks and months when rumors or bad news surface (which is often). In this type of market environment, traders and investors should exercise even more caution and prudence than usual.

IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.

Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.

A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart